Crypto custodian BitGo acquires cash-strapped rival PrimeTrust
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(Kitco News) - Digital asset custodian BitGo has reached a preliminary agreement to purchase its rival Prime Trust amid rumors that the latter’s ability to service withdrawals has been limited due to the fallout from this week’s enforcement actions by the Securities and Exchange Commission.
According to a statement posted by BitGo on Thursday, the firm has signed “a non-binding term sheet to acquire 100% of the equity of Prime Core Technologies, Inc., the parent company of Prime Trust, a leading provider of financial infrastructure for fintech and digital asset innovators.” At this point, the deal still requires regulatory approval.
As part of the deal, Prime Trust’s Nevada Trust Company would join BitGo’s existing global network of regulated trust companies in South Dakota, New York, Germany, and Switzerland; its fintech API infrastructure and exchange network would be used to “reinforce BitGo Wallet Services and BitGo’s Go Network; and BitGo would incorporate Prime Trusts’s network of banking partners and payment rails, crypto IRA, and “additional wealth management offerings.”
“This is a landmark transaction, leading a greater shift in the digital asset landscape toward a more secure and sustainable future,” said Mike Belshe, CEO and co-founder of BitGo. “With the expected acquisition of Prime Trust, BitGo is well positioned to enhance its best-in-class, trusted solutions and to service the combined customer base.”
Prime Trust, a Nevada-based firm that custodies crypto and helps digital-asset companies park cash at network banks, had been trying to raise as much as $25 million in emergency funding in recent weeks amid rumors that it faced bankruptcy due to a cash crunch.
Earlier this week, customers at Binance.US, Abra, and Swan Bitcoin – which all used Prime Trust as their Bitcoin custodian – began complaining about delayed withdrawals.
A notice posted on Swan’s website says that the platform is undergoing a “major system upgrade,” and Cory Klippsten, the CEO of Swan Bitcoin, tweeted that all of the Bitcoin and U.S. dollars held by the platform's clients are now custodied with Fortress or BitGo.
On Wednesday, Bitcoin Magazine CEO David Bailey tweeted, “Major custodian about to declare bankruptcy without last minute bailout. Take your Bitcoin off exchanges, even bitcoin-only platforms.”
During a Twitter Spaces live audio event on Thursday, Bailey reiterated his claims that the firm was looking to raise $25 million in funding and said that recent actions by Prime Trust haven’t led him to feel confident about the company's long-term health.
“All I can say is, we’re a media company,” Bailey said. “They’re coming to us for funds? That’s not a positive sign,” implying that the company may have asked Bitcoin Magazine’s team for financial assistance.
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Prime Trust saw an influx of business following the collapse of Signature Bank, including taking on Binance.US as a customer, who used the firm’s network of banking partners to store its customers’ cash.
Binance.US has since announced that USD transfers to and from the exchange will be halted on June 13, as its banking partners have said they would temporarily suspend their services pending the outcome of the enforcement actions taken against the exchange, including the freezing of more than $2 billion worth of the platform's assets.
The deal with BitGo comes at a good time for Prime Trust, as its funding options were drying up and it risked leaving its users without a functioning custodian.
“The combination of Prime Trust and BitGo would be a significant enhancement for the industry,” said Jor Law, interim CEO and President of Prime Trust. “No other company will have the breath of product and services nor depth of experience that this combined company would have. We are excited to offer our world-class infrastructure within a broader ecosystem and revolutionize the future of crypto.”